Policing for profit in private environmental enforcement

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With the presumed lack of interest in environmental enforcement from the incoming administration, it’s probably safe to say that environmental groups will play an increasing role in enforcement. Several federal environmental statutes authorize any private group to enforce regulatory requirements through so-called “citizen suits.” Although libertarians generally favor privatization, privatized enforcement can be deeply problematic and threaten the rule of law.

The Clean Water Act’s citizen suit process is typical of how this system works. Under it, any group can enforce the statute’s requirements against anyone by (1) sending them a letter informing them of the alleged violation and (2) after 60 days, filing a federal lawsuit seeking an injunction, penalties, and attorney’s fees. The cost of defending against one of these suits—and the potential attorney’s fees—are high enough that most people, even if innocent, will have little choice but to pay the group off.

And that’s where the problem lies. These suits can both be a huge money maker for special interest groups and extremely coercive for property owners and small businesses, raising a significant risk of extortion-by-litigation. Several groups raise hundreds of thousands of dollars a year through these actions. Often, the letter threatening a lawsuit will demand tens of thousands in attorney’s fees and additional tens of thousands in donations to affiliated environmental groups.

The profit margins for these cases can be huge. The demand letters—most of which are form letters—can be based on nothing more than a Google Earth search. For an hour or two of work, an environmental lawyer can demand an obscene amount in attorney’s fees. These fees don’t have to be proportional to the alleged violation. And, since these settlements are private, the amount of attorney’s fees doesn’t have to be justified or proven to a judge.

(When cases do go all the way through litigation, attorney’s fees in “public interest” cases can still dwarf the environmental group’s costs. Attorney’s fees are based on a fictional hourly rate, which will often greatly exceed the amount the particular attorney actually makes. For instance, it’s common for attorney’s fees to be based on an hourly rate of $500 or more. A nonprofit attorney making a $100,000 can raise an entire years salary in only 200 hours—about 4 weeks worth of work—at that rate.)

Enforcement officials with a direct financial stake in an enforcement action raise significant Due Process Clause concerns. For instance, police should not be paid per arrest or prosecutors per conviction. That financial incentive distorts the enforcement process. It encourages government officials to take absurdly disproportional enforcement actions against extremely minor violations—violations which call for prosecutorial discretion, not overreaction. A direct financial incentive also leads police and prosecutors to focus on those least able to defend themselves. You may recall that John Oliver memorably and sharply criticized civil asset forfeiture for the same reason.

Giving government officials a direct financial incentive in their enforcement decisions creates too great a risk of abuse. Isn’t the same true when that power is delegated to a private environmental group? The citizen suit provisions in the Clean Water Act and other federal statutes give powerful special interest groups a strong profit incentive to bring enforcement actions for extremely minor violations, especially against those who can’t possibly afford to defend themselves. If we’re going to see even more private enforcement in coming years, we need to reform the process to reduce these risks of abuse.

Update: I explain why these lawsuits are no substitute for property-based nuisance suits here.